Featured Articles

Jul 24, 2014

Learn From The BP Disaster. Then Drill Again.- Nansen G. Saleri

Published: May 07, 2010

(From THE WALL STREET JOURNAL)
By Nansen G. Saleri

April 20, 2010 was one of the darkest days for the oil industry. Yet the BP blowout in the Gulf of Mexico could be the trigger for something good -- a fresh reassessment of the industry's approach to managing risk, safety and civic responsibility.

The explosion on the Deepwater Horizon rig led to the death of 11 workers and a dramatic and so-far uncontained leak, but beyond that the magnitude of the environmental and economic harm is an unfolding question mark. Nevertheless, it is fair to say that the in-place risk-management and accident-prevention systems on the Deepwater Horizon failed. One might arguably draw a parallel with the global financial crisis, where accepted, pre-crisis paradigms about managing risk proved exceedingly inadequate in hindsight. Why didn't the oil industry anticipate the possibility of disaster?

The answer may partially lie in the extraordinary safety record of offshore U.S. drilling over the last four decades. The last significant mishap in U.S. waters dates back to 1969, the year of the first lunar landing. A blowout on Union Oil's Platform A, six miles offshore from Santa Barbara, Calif., spilled an estimated 80,000 to 100,000 barrels of crude oil over a period of 10 days. This resulted in considerable environmental damage and loss of wildlife, including 10,000 birds. The ensuing chain of technical and procedural improvements in safety practices worked pretty well. The end result was an infinitesimal spill rate over several decades which in turn led many, including BP, to consider a blowout an inconceivable event.

So what now? What is needed is a scientific, thorough and apolitical investigation headed possibly by the National Academy of Sciences and drawing in experts from the oil and gas industry as well as the government agencies involved. The investigation must also evaluate the entire post-accident response effort led by BP in cooperation with local, state and federal agencies.

Some questions that must be diligently probed by investigators are: 1) Why did the blowout preventers -- the massive valve assemblies designed to stop an uncontrolled flow -- fail? And what are their reliability statistics? 2) Were the redundant safety systems truly redundant? It seems obvious they weren't, but this has to be verified. 3) How well trained was the crew? 4) Were the safety systems and contingency plans in place commensurate with the immense values of the total assets at risk -- human, material and environmental? 5) Did operational and cost-cutting practices compromise safety?

What escalated the April 20 incident from a tragic accident to a catastrophe was not the blowout itself but the ensuing inferno that sunk the $650 million BP platform. Without the fire, the oil well leak could have probably been brought under control within a week. Thus it is critical to determine what future designs could best enhance survivability of giant offshore structures even under blowout conditions. Are there lessons to be learned from the airline industry, which has engineered significant reductions in post-crash fires during the last decade?

It is sobering to realize that the accident could have been worse under other plausible geologic and water-depth conditions. The currently estimated blowout rate of nearly 5,000 barrels a day could have doubled had the producing formation contained more oil and the pressure on the leaking well head been less (i.e., if the depth of the water above the sea-bed had been 1,000 feet instead of 5,000 feet).

BP's efforts to stop the blowout over the next 100 days will have a defining impact on the future of offshore oil drilling, and by extension on the future of the U.S. energy industry for the coming decades. The Gulf produces 1.6 million barrels per day, nearly one-third of total U.S. output. Offshore oil extraction is the main reason U.S. crude output has actually increased during the last two years for the first time since 1970. A moratorium on offshore drilling is a bad idea as it only serves to transfer risks from drilling to transportation, as the risk of tanker spills are higher.

This is not an argument to rationalize a catastrophe whose dimensions are still undefined. But the correct path forward is simple. Get to the bottom of the Deepwater Horizon failure and bring about fundamental changes to make similar events impossible. An industry capable of consistently placing wells within a foot of their target locations tens of thousands of feet underground, and extracting oil and gas reserves under extreme temperature and pressure conditions, should aim for nothing less.

That would be the best tribute to the 11 brave men who lost their lives on Deepwater Horizon. The Challenger disaster did not stop the U.S. space program. Neither should this tragic incident diminish U.S. aspirations for a healthy and safe domestic oil supply.

[back]
Loading...
NATURAL GAS STORAGE*
EIA report for week ending 7-11-2014 Our prediction for week ending 7-18-2014
2129 2223
Weekly change
+107up +94upest

Commodity Prices ($)

Natural Gas4.167
Crude Oil93.64
Heating Oil2.9017
RBOB Gas2.8118
Coal59.03